Business Directories

Jafza hires Citi to advise on $2bn bond options

Dubai, February 27, 2012

Dubai's Jebel Ali Free Zone (Jafza) has hired Citigroup to advise on options for meeting a $2 billion Islamic bond maturity this year, including the potential sale of its UK-based developer Gazeley, sources said on Monday.

Jafza, which runs an industrial free zone on the outskirts of Dubai, has said it aims to refinance the 7.5-billion dirhams Islamic bond which matures in November.

"Citi will for sure look at all options available to address the debt," one of the sources said, speaking on condition of anonymity. "If they can help sell Gazeley in this market, then it will definitely go toward helping repayment but these markets are not so conducive for asset sales.

"The best option (for Jafza) will be to roll-over and extend maturities. That is where banks with big balance sheets come into play."

Spokesmen for Jafza and Citigroup in Dubai declined to comment.

Details on refinancing the Jafza bond are expected to be finalised by the end of April. The proposed structure involves an approximately $300 million cash payment, a new Islamic bond and a club loan involving up to seven banks, two banking sources said.

"There will be some cash to be paid by Jafza ... depending on the pricing of the other two," one of the bankers said.

Dubai Islamic Bank holds more than $500 million of the current bond.

Gazeley is one of the four businesses held by Economic Zones World (EZW) which operates technology, logistics and industrial parks as well as Jebel Ali Free Zone under the Dubai World Group umbrella. Dubai World bought Gazeley from Wal-Mart Stores in 2008 for an estimated 300 million to 400 million pounds ($459-611 million).

Sources told Reuters in January that EZW was eyeing a sale of Gazeley as it looks to repay debt.

Jafza chairman Hisham Abdullah Al-Shirawi said in December that he does not rule out asset sales to help raise funds to pay off debt but said the company does not need to seek government support.

The Jafza bond, along with DIFC Investment's $1.25 billion Islamic bond which matures in June, are in the spotlight as investors weigh Dubai's refinancing risks in 2012.

The emirate had $3.8 billion in bonds maturing in 2012 from a trio of state-linked firms, including Jafza and DIFC Investments.

The third, Dubai Holding Commercial Operations Group (DHCOG), part of the ruler's private holding company, repaid a $500-million bond days ahead of schedule last month.

Dubai, which is working through a series of restructurings in the wake of its 2009 debt crisis, has said there are no plans to restructure debt held by state-linked companies, although it is ready to support them through "various" refinancing options.

DIFCI, the investment arm of the firm that runs Dubai's financial free zone, has hired US investment bank Moelis & Co to advise on options for its bond, sources told Reuters last week. - Reuters